Post trade will face the biggest transformation of its existence during the next few years. Euroclear will be at the forefront with new services and a direct link to TARGET2-Securities settlement from Euroclear Finland.

As of 2015, TARGET2-Securities platform will offer centralised delivery-versus-payment settlement in central bank funds. We will see 24 European countries joining, including Finland in 2017.

Increasing your competitive edge

CSDs have a key role in shaping tomorrow’s market structure. T2S and EU regulation will support harmonising of settlement and enable new services. Collateral, funds and issuer services will strengthen the competitive edge of banks and issuers. The CSD regulation will ensure a level playing field among CSDs to pave the way for T2S.

Yannic Weber of Euroclear Finland and Euroclear Sweden says: “Participants and issuers will benefit from message standardisation (ISO 15002 and 20022), direct access and support to TARGET2-Securities. T2S will streamline the business, bring more efficiency and most likely cut costs.”

He continues: “This enables asset optimisation across locations with improved connectivity to other CSDs. Moving collateral becomes easier. Banks will probably review their business model in the future to substantially reduce their cost base and create competitive advantage. Harmonisation and standardisation across market, system consolidation and the acceptance of more instruments by the CSD should over time considerably reduce their back office costs.”

Funds made easy

Weber also believes that the Nordic direct-holding model has a lot to offer. “The direct-holding model reduces the number of processing steps. Ownership information is easily available, and anti-money laundering procedures can be better monitored. Efficient voting and tax collection processes may be used, and ancillary processes like pledging are facilitated. It also enables banks to outsource processes to the infrastructure and mutualise costs.”

He adds: “When comparing CSD costs, we should look at the value for end-users, i.e. issuers and investors. In direct holding, they receive high-class services and enjoy more protection for their assets.”

According to Weber, the Finnish market will see additional functionalities, e.g coupon and dividend payment done by Euroclear Finland, and use only one system covering all securities.

“The processes will be mutualised further through the CSD, and more instruments may be included, i.e. mutual funds, ETFs and housing company certificates.”